WEEKLY NEWS HIGHLIGHTS | 24 April - 30 April 2019

The Business Times – April 30

Property developer Oxley Holdings announced on Tuesday morning that it has signed a deal to sell Chevron House for up to S$1.025 billion, just 16 months after acquiring the prime office building in Raffles Place for S$660 million in December 2017.
Oxley said that on April 29, it entered into a sale and purchase agreement with Golden Compass (BVI) for the latter to buy the entire interest in its wholly-owned subsidiary, Oxley Beryl, and take over the existing bank loans for an aggregate value of up to S$1.025 billion.

Tricia Song Head of Research:

After a slow first quarter, the investment sales momentum has picked up considerably in the second quarter of 2019. We expect the flurry of commercial investment sales, following Tampines Grande and Chinatown Point recently. It reflects investors’ optimism on Singapore’s commercial real estate market in general, as the interest rate cycle appears to have peaked. The recent URA Draft Master Plan 2019 incentive schemes to encourage conversions of older office buildings in the CBD could also reduce the availability of stock, and hence support rents further, providing further capital appreciation potential for prime assets.

The Business Times - April 27

Some analysts say this might be a sign that potential buyers are resisting current price levels amid the mid the property cooling measures.

According to the Urban Redevelopment Authority's (URA) quarterly figures released on Friday, developers launched 2,989 units, compared to Q4's 1,657 units, but sold 1,838 units, similar to Q4's 1,836 units.

Unsold units also rose in the quarter, to 36,839 excluding executive condominium (EC) apartments, from 34,824 units in the previous quarter.

Tricia Song, Head of Research:

The decline in private home prices in Singapore gathered pace in Q1 2019, dipping by 0.7% from the previous quarter – a sharper decline compared with the 0.1% decrease in Q4 2018. It is also slightly steeper than the initial estimates of a 0.6% decline released earlier this month.

This marked the second straight quarter of price decline in the private residential sector. Overall private home prices are now 0.7% below the most recent peak in Q3 2018 and 3.9% below the all-time peak in Q3 2013.

The property cooling measures of July 2018 – like speed bumps – have been effective in bringing down prices and total transaction volumes. Developers’ new sales in Q1 2019 were flat QOQ at 1,838 units, from 1,836 units in Q4 2018, but were still up 16% YOY due to more attractive launches. Meanwhile, resale transactions declined 5.7% QOQ and nearly halved YOY to 1,858 units. Read our full analysis.

The Business Times - April 27

Rentals of office and retail space reversed direction to dip in the first three months of 2019, owing to uncertainties in the business outlook and continued woes in the retail sector.

Going by official figures from the Urban Redevelopment Authority (URA) on Friday, rentals in the central region of Singapore slipped by 0.6 per cent in the first quarter of 2019, in contrast with the increase of 0.5 per cent in the fourth quarter of 2018. This was the first quarterly drop since Q2 2017.

Island-wide vacancy fell to 11.8 per cent, from 12.1 per cent at the end of the previous quarter, supported by net absorption of 19,000 sq m mainly taken up by technology firms and co-working operators.

Tricia Song, Head of Research:

Colliers Research forecasts that with a higher base for comparison in 2018, CBD prime office rents will likely grow at a slower pace – at about 8% - in 2019. Meanwhile, Grade A and Premium CBD office vacancy is expected to continue to trend below 6% until 2022.

We believe the growth momentum in the office property sector will continue to carry through from 2018 into 2019, supported by healthy occupier demand. Read our full analysis.

The Business Times - April 25

Rentals and prices of industrial space in Singapore remained relatively stable in the first quarter of this year compared with the previous quarter, according to the latest data from industrial land and infrastructure agency JTC Corp.

The price index was down 0.1 per cent, while the rental index was flat. Compared with a year ago, the price index was unchanged while the rental index eased 0.2 per cent.

Meanwhile, the occupancy rate of the overall industrial property market for the first quarter was flat over the previous quarter, but rose 0.3 percentage point year on year to 89.3 per cent.

Tricia Song, Head of Research:

We think the market statistics in Q1 2019 are evidence that industrial rents in general have bottomed but a significant rental recovery may be premature. New business park properties and high-spec spaces should continue to enjoy rental improvements due to limited stock and tighter new supply. Business parks may also benefit from potential decentralisation of qualifying businesses, driven by the recent URA Draft Master Plan's incentive schemes to promote more mixed developments within the central business district (CBD), and as CBD prime office and business parks’ rental differential continue to widen.

Warehouse supply is expected to slow down over the rest of 2019 to 1.6 million sq ft (gross, equivalent to 1.4% of current stock). However, with warehouse vacancy rate remaining high after the increase to 10.8% in Q1, we anticipate logistics rents to remain soft for the rest of this year. Read our full analysis.

The Business Times - April 26

East Coast is heating up with launches galore, with possible major launches this year yielding at least 1,500 units, going by Knight Frank's estimates in March.

The next one up is Coastline Residences on Amber Road, which will be launched for sale this weekend at an average of around S$2,450 per square foot (psf).

Three-quarters of the units in the freehold, 144-unit condo will have sea views, the boss of Sustained Land Douglas Ong told The Business Times.

Tricia Song, Head of Research:

East Coast (District 15) is shaping up to be an upper-high end residential enclave, with prices firmly above SGD2,000 psf for new freehold launches. The upcoming Thomson-East Coast MRT line - to be in place by 2023 - augurs well with these new projects’ completion timeline. We estimate around 1,600 units in District 15 could be launched from the earlier collective sales over the next six to 18 months. This number is not excessive, compared with suburban districts with potential launches of over 2,000 units per district such as District 19 (Hougang, Kovan), District 18 (Tampines) and District 5 (West Coast). Nearby One Meyer, launched in March, had sold 12 or 18% at SGD2,627 psf over its first month. Developers are generally confident of the demand-supply dynamics and will not be in a hurry to cut prices to move inventory in the near term.